Mergers and the Market for Busy Directors: An International Analysis

61 Pages Posted: 1 Jun 2018  

Stephen P. Ferris

University of Missouri at Columbia - Department of Finance

Narayanan Jayaraman

Georgia Institute of Technology - Scheller College of Business

Min-Yu (Stella) Liao

Illinois State University - Department of Finance, Insurance and Law

Date Written: April 15, 2018

Abstract

Using 13,233 acquisitions from 57 countries, we examine M&A decisions made by busy boards. We find that few busy acquirers originate from emerging markets and that they tend to undertake cross-border mergers, favor public targets, finance with cash and equity, pursue non-diversifying mergers, avoid targets with multiple bidders, and long-term underperform relative to non-busy acquirers. Importantly, we discover a non-linear relation between an acquirer’s board busyness and announcement returns. We find that the labor market penalizes directors who approve bad acquisitions, but does not reward them for good mergers. We observe that acquirers with busy boards consistently underperform.

Keywords: directors; busy boards; governance; mergers and acquisitions

JEL Classification: G3; G34

Suggested Citation

Ferris, Stephen P. and Jayaraman, Narayanan and Liao, Min-Yu (Stella), Mergers and the Market for Busy Directors: An International Analysis (April 15, 2018). Georgia Tech Scheller College of Business Research Paper No. 18-17. Available at SSRN: https://ssrn.com/abstract=3170753 or http://dx.doi.org/10.2139/ssrn.3170753

Stephen P. Ferris

University of Missouri at Columbia - Department of Finance ( email )

214 Middlebush Hall
Columbia, MO 65211
United States
573-882-6272 (Phone)
573-884-6296 (Fax)

Narayanan Jayaraman

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
404-894-4389 (Phone)
404-894-6030 (Fax)

Min-Yu (Stella) Liao (Contact Author)

Illinois State University - Department of Finance, Insurance and Law ( email )

Normal, IL 61790
United States

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